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Mylan Prices Senior Notes

Zacks Equity Research

Mylan Inc. (MYL) unveiled the pricing of $2 billion senior notes in the form of bond issuance, which will be comprised four groups of $500 million each (aggregate principal amount).

The $500 million aggregate principal amount of 1.35% senior notes will mature in 2016 whereas the $500 million aggregate principal amount of 2.55% senior notes is expected to mature in 2019. The other two groups of $500 million carry interest rates of 4.20% and $5.40 % due in 2023 and 2043, respectively. The offering is anticipated to close on Nov 29, 2013.

The net proceeds will be used primarily to fund its impending acquisition of Agila Specialties – the injectable drugs division of India’s Strides Arcolab. Through this deal, expected to close by year end, Mylan intends to strengthen its presence in the high potential generic injectables market. Mylan also intends to utilize the funds for general corporate purposes and share repurchases.

Apart from the pricing of senior notes, Mylan was also in the news when it launched its generic version of Novartis’ (NVS) attention deficit hyperactivity disorder (ADHD) treatment, Focalin XR (dexmethylphenidate hydrochloride extended-release) capsules (30 mg) in the U.S. With Mylan being the first to file, the company will enjoy 180 days of marketing exclusivity. As per IMS data, as of Sep 30, 2013, Focalin annual sales were approximately $67.34 million in the U.S.

Mylan, one of the largest players in the global generics market, has a presence in approximately 140 countries. As of Nov 18, 2013, the company had 179 abbreviated new drug applications pending approval by the U.S. Food and Drug Administration (:FDA), representing $90.5 billion in annual sales. These include 40 first-to-file opportunities, representing $24.1 billion in annual sales. The data released by IMS Health is for the twelve-month period ending Jun 30, 2013.

Mylan’s generic unit is its main growth driver. Bulk of the revenues of the company is generated from generic third-party net sales, derived from sales in North America, Europe, the Middle East & Africa and Asia-Pacific. Moreover, Mylan has a strong generic pipeline and should continue benefiting from a large number of high-value branded drugs scheduled to go off patent in the next couple of years. These patent expirations should boost the generic product portfolio of Mylan.

Mylan carries a Zacks Rank #3 (Hold). Actavis, Inc. (ACT), another generic player, looks more attractive with a Zacks Rank #2 (Buy). Shire (SHPG), a leading player in the ADHD market, carries a Zacks Rank #1 (Strong Buy).

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